I have a memory picture of an urban highway in Shenzen, southern China. Recently built, with abundant flowering shrubs planted along its central reservation, it was lined as far as the eye could see by uncountable apartment towers, many of them unfinished. This was 2009 and it was my first glimpse of the debt-fuelled property bonanza that had begun to grip the Chinese economy – alongside the export-led manufacturing boom that was also plainly visible, thanks to satellite maps of the vast agglomeration of factories surrounding the new-rich residential areas.
It’s easy to be a permanent bear in any market, because history tells us they all come crashing down in the end. But my own long-term negativity towards China prompts me to nod knowingly at news that the property giant Evergrande, which has current projects in 280 Chinese cities, has filed for US bankruptcy protection as part of a restructuring of $32 billion of offshore debts; that shares in the even larger Country Garden group have plummeted after it failed to meet bond payments; and that companies accounting for some 40 per cent of Chinese home sales have defaulted in the past two years.
Meanwhile, China’s exports were down 14.5 per cent year-on-year last month, its domestic consumers are as nervous as its unpaid bondholders are angry – and its banking industry is certainly more fragile than published balance sheets might suggest. GDP growth that has averaged almost 9 per cent per annum since 1989 may fall below 5 per cent this year. Official interest rates have been cut as a stimulus, but no one believes Beijing’s autocrats can intervene, manipulate or lie on the scale required to shore up the entire tottering $20 trillion economic colossus.
In my first column of this year, I wrote that if there’s a black swan – a shock that changes everything – out there somewhere, I put the chance of it coming from China at 60 per cent. If it’s now floating towards us from downtown Shenzen, there’s no consolation in saying I’m pretty sure I anticipated it all those years ago.
Roux the day
Is something rotten in the state of Mayfair’s Upper Brook Street? At No. 18, Odey Asset Management imploded after allegations of sexual impropriety against its founder, Crispin Odey. At No. 43, Le Gavroche – the Roux family restaurant that brought haute cuisine to London and was much frequented by the gourmand Odey himself – has announced it will close when its lease ends early next year. I don’t suppose the loss of the Odey expense account is the entire reason for the closure, but it’s interesting to reflect on the wider Roux footprint in London’s financial scene.
Besides feeding the fat cats at Le Gavroche in Mayfair (and previously in Lower Sloane Street), Albert and Michel Roux created Le Poulbot in Cheapside, where the £5 set lunch made it a regular hangout for my cohort of young bankers toiling across the road at Schroders. It was named ‘probably the best in the City’ by the New York Times in a 1984 article headed ‘Britain’s restaurant revolution’ that garlanded the brothers’ expanding portfolio.
In an era when deep-pocketed American firms were crowding into the Square Mile, Le Poulbot also became a haunt of headhunters trying to poach posh Brits to add tone (or so we imagined) to the rough milieu of New York-style trading floors. ‘I’ve had an offer from Goldman Sachs,’ a double-barrelled colleague whispered one day. ‘Goldman who?’ I replied. Those were the days.
Then there was what the Roux brothers called their ‘fraternité’ with the globe-trotting financier Michael von Clemm, who chaired their business while also leading Credit Suisse First Boston and later Merrill Lynch. It was also in 1984 that von Clemm ventured east to the semi-derelict Canary Wharf in search of industrial space for a Roux catering venture – and conceived instead the idea of the vast office development that was eventually brought to completion by the Reichmann family from Canada.
As office needs shrink and anchor tenants such as HSBC move out, Canary Wharf itself may now slowly go the way of Odey and Le Gavroche – an ironic footnote to this Roux-flavoured ramble round London being that the ideal premises for a serious downsizer from Docklands is surely an elegant town house in Upper Brook Street.
From the departure lounge
Also in my first column of January, I see I praised Ryanair: ‘My cheap New Year flight to France, booked in seconds, was bang on time and full to the last seat.’ That column was filed (like this one) from the departure lounge on the return leg. But moments after I pressed ‘send’, we were told that ‘fog’ (actually thin mist) had forced our aircraft to divert to another airport, to which we would be bussed. No buses appeared and no more announcements followed; several hours later a plane arrived to collect us.
‘Typical bloody Ryanair,’ muttered fellow passengers. And with the end of the holiday season in sight, that sentiment was echoed this week in media comment about the way the add-on pricing systems used by the likes of easyJet and Wizz Air as well as Ryanair – for luggage, seat allocations, booking changes and the rest – generate far higher fares than first advertised and sometimes higher even than British Airways.
To which I say piffle. You only have to book once to learn how to play the system: buy the security fast track but not the pointless ‘priority boarding’; pick the cheapest aisle seat; never check a bag in if you can avoid it; never buy the insurance offer or the ‘meal deals’. The low-cost airline model is perhaps the greatest modern advance in consumer choice: it smashed state carriers’ cartels, daily defeats the bolsheviks of European air traffic control, takes us to unheard-of -destinations at fares that are still cheaper than long-distance UK train journeys – and sets a benchmark for brutal efficiency that every other business sector would do well to aim for.
Of course it also sometimes goes wrong. If it does so today, I’ll tell you next week.
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